U.S. budget woes weigh on stocks, yen off

Mon Dec 24, 2012 12:48pm EST
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By Ryan Vlastelica

NEW YORK (Reuters) - The yen tumbled on Monday in an otherwise quiet day as a continued deadlock in U.S. budget talks left an undercurrent of uncertainty in markets ahead of the Christmas break.

Volume was light going into the holiday, with many traders already out on vacation. The U.S. stock and bond markets close early, while a number of global markets, including those in Germany and Italy, were closed.

The major mover was the yen, which fell to 20-month lows after incoming premier Shinzo Abe renewed pressure over the weekend on the Bank of Japan to adopt a 2 percent inflation target. The dollar rose 0.7 percent against the yen.

The FTSEurofirst300 .FTEU3 closed down 0.1 percent while the MSCI index of global stocks .MIWD00000PUS was slightly lower.

Global equities have been pressured by the political stalemate with respect to the U.S. "fiscal cliff," a combination of tax hikes and spending cuts scheduled to take effect next year. Investors fear that if no deal is reached, it could push the U.S. economy into recession, severely hurting global growth.

Some U.S. lawmakers expressed concern on Sunday that the country would go over the cliff, and some Republicans charged that was President Barack Obama's goal. Talks are stalled with Obama and House of Representatives Speaker John Boehner out of Washington for the holiday.

"This will continue to erode confidence and continue to cause problems," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. "I am sure they will come up with some patch like they always do... but it's concerning that they can't get their stuff together."

Although there is no official date for talks to resume, the two sides still have a few days after Christmas to find a compromise before the January 1 deadline when the measures start to take effect.   Continued...

A cameraman films rises in share prices at the Tokyo Stock Exchange in Tokyo December 17, 2012. REUTERS/Yuriko Nakao